Through the lens of VC | GGV Capital’s Jenny Lee on unicorn traits and more

GGV Capital and its portfolio of tech giants in both the US & China.

By

Through the lens of VC | GGV Capital’s Jenny Lee on unicorn traits and more

Founded in 2000, GGV Capital focuses on multi-stage investments in the US and China across a wide range of technology sectors. The VC firm has offices in Menlo Park, San Francisco, Beijing, and Shanghai.

In the past 18 years, GGV proved its foresight many times over. It invested in some of the biggest tech companies we know now: Airbnb and Zendesk in the US; Alibaba, Qunar, and Didi in China, and Grab in Southeast Asia, to name a few.

Today, the VC manages US$3.8 billion in capital across eight funds and is said to be seeking another US$1.88 billionto launch new funds.

Singaporean native Jenny Lee, known as an investor with the “Midas touch” is one of GGV’s managing partners and based in Shanghai.

She has led GGV’s investments in hiSoft, 21Vianet, SinoSun, and YY – all of which have successfully listed on the stock exchange. When Lee fully exited social media firm YY last year, this deal had brought in a 15x return. She was also involved in GGV’s deal with Xiaomi. The gadget maker had its debut on the Hong Kong Exchange (HKEx) earlier this year.

Here’s an excerpt from our conversation with Jenny Lee, who was named one of the top 80 tech investors of 2018 by Forbes. It has been edited for clarity and brevity.

Interview with Jenny Lee

KrASIA: GGV invested in many tech unicorns from early on. How did you spot those opportunities?

Lee: GGV partners have been investing in the US and China markets for the last 18 years. This has brought about a unique perspective and local knowledge of the world’s two largest venture markets. It has allowed us differentiated insights to extrapolate and predict the next trends likely to emerge from each region.

Our learnings and pattern recognition of successful traits in previous unicorns and market leading companies helped us sift through and identify the best founder-product-market fit models. A very strong network of GGV founders adds to our strong deal flow, referrals and the ability to identify and find that special management team that can create the next new model. Lastly, the GGV brand, with our expertise focus-driven investment thesis – wherea future vision kickstarts a deductive process that involves deep learning about a sector to drive investment decisions – also encourages a lot of quality inbound deal referrals from the CEOs themselves as well as our peers in the industry.  GGV is also sometimes known as the “Switzerland of venture capital”. We are a preferred and value-added partner, not just for startup CEOs but also for other VCs in the market.

 

KrASIA: What were some of the characteristics of those firms when they were still small startups?

Lee: The common characteristics we often see are: 1) Great founder-product-market fit, 2) Driven by CEO and founders who can clearly articulate [their] vision, passion and unique advantage, 3) Great founder-VC fit; small startups need to accumulate the right ecosystem network from Day 1, leveraging the right angels/investor resources is key, 4) Founders who are open to listening, learning and adapting to market conditions.

 

KrASIA: You’re known as someone whose investment strategies evolve with the marketas opposed to following a narrow thesis. What does that mean practically in terms of how you make investment decisions, compared to other investors?

Lee: I think it helps that I love what I do, I love engaging with founders and listening to their stories, even when it’s not our GGV investment sectors, and I love seeing how new models and new products can be created when we take ourselves out of our comfort zones and think out of the box.

To stay grounded, I remind myself daily to “suspend disbelief” and listen carefully to the founder, to changing consumer and market needs and to view the world from the target customers’ perspective, not mine. I educate myself on all interesting new technologies across different disciplines, different industries. The best disruption comes from cross-discipline innovation.look beyond current market sizes, shut out other VC hot areasto avoid being unduly influenced and extrapolate if the startup being pitched has a chance to be a “moonshot” success. I determine if this is the CEO I can work with for the next 10 years.Final investment decisions are made after they pass the “brain-test” (qualitative due diligence like the market, tech, returns analysis) AND the “heart” test, which means chemistry with CEO, the CEO’s passion, my conviction around their business etc.

 

KrASIA: You said before that you never want to and never would retire from this job. What do you think of the job as an investor?

Lee: It’s a passion for me, not a job. The job as an investor is a lonely one and requires strong individual convictionaround deals, independent thinking, and the tenacity and resilience to weather through tough times and uncertainty with the founders. At the same time, it is a great practice ground for honing your EQ and IQ and a problem-solving mentality as you are constantly working with people with different backgrounds and different interests, both at the board level and company level.

The emotional and financial rewards are excellent if you are right and very depressing and personal if you are wrong. In our business, the failures happen first, so the ability to pick up the pieces and continue to move on is similar to what startup founders go through. To be a good investor, you need to develop a startup founder’s internal strength and persistence.

 

KrASIA: In your 12 years with GGV you probably witnessed the whole process of China growing from a tech hinterland to its current state. When it comes to China, what’s the next wave of opportunity for investors and entrepreneurs?

Lee: The next wave will be captured by an upgraded version of startups in China 10 years ago, largely in terms of better quality of management talent, innovation in business models and better-financed startups, especially in a heightened competitive environment now cornered by giants like Tencent, Alibaba, Xiaomi, Baidu etc.

Trends we are excited about include(1) startups leveraging AI and machine learning algorithms to model and personalize large datasetsin verticals like education, finance, healthcare, business processes, retail/e-commerce; (2) startups leveraging data online to deliver better services offline– more integrated online and offline services, particularly in the retail storefront areas, (3) startups with cross-border models, leveraging learnings from one region expanding to the next, eg, Exporting successful business models from China to Southeast Asia, from the US to South America or Europe. (4)last but not least, new disruptive products and services made possible by computer vision, robotics automation and integration of machines with a human – the sci-fi stuff.

 

KrASIA: Some people say these days that China’s startup world is not as active and lively as it was a few years back, do you agree?

Lee: No. Whoever said this must not have spent time in China or has missed the main vibe of China’s startup scene. China is now more vibrant than before with even more interesting and experienced founders heading up their 3rdor 4thstartup. This is an economy where even the government is taking an active role to provide policy and subsidy support and investment.

Some areas of innovation are adoption of AI across industry verticals, there’s huge support around anything electric vehicles; there are new consumer models built on the huge user traffic dividend on the WeChat platform (which has more than 1 billion users); innovation around last mile, or last meter retail experience, such as new  unmanned storefronts; next-generation social platforms built around specific demographics and personalized content, like exercising, music, online streaming et;, adoption of robotics and automation to manage the increase of labor cost and appropriate labor shortage.

 

KrASIA: Do you think the investment opportunities in Southeast Asia are comparable to those China presented five years ago? And what do you think are the opportunities for both venture capitalists and entrepreneurs across the region?

Lee: Yes and no. There are excitements and hopes that Southeast Asia may be like what China was five years ago, albeit a smaller market. There is some similarity in internet user growth, online behaviour and mobile platforms, particularly in homogeneous markets like Indonesia and Vietnam. Hence we expect some predictable growth trends to emerge first, such as e-commerce, logistics, transportation, and delivery services, as well as digital entertainment like live streaming and social local content needs.

What’s uncertain is the government attitude towards supporting internet growth via infrastructure build an online content censorship guidelines across the countries. China, unlike many other countries supported this industry, from the PC to mobile transition, from mobile to AI, to automation, with strong government infrastructure, policies, and support.  Without support like better cellular coverage (think 5G in China) and lower data rates from China telecom carriers, the internet startups would not have grown at the rates we know. While China is also a highly regulated regime, the officials have adopted a wait and see approach to allow Internet innovation to take root first before imposing regulations, eg, online video, P2P lending, shared economy, online social sharing, and live streaming, micro-payments etc.

 

KrASIA: What does a successful pitch to GGV look like? And can you share some general tips for entrepreneurs for when they are pitching to investors?

Lee: Do due diligence on the VCs and their partners, understand if their investment strategy, focus, and firm culture is a fit with you and your startup.  If there is a fit, look for a trusted referral introduction. Pitching your business to a partner who covers and knows your sector is more important than finding your favourite VC partner who has no interest in your area.  Finally, worry less about funding during the pitch, focus on explaining your vision, telling your story, introducing your team and how you are going to solve a key problem and build a leading company. If you cannot secure financing, at least try to walk away with some advice. Knowing your blind spots early in the funding process will help you adjust and pitch better next time.

 

KrASIA: Can you recommend any books you are reading that are worth sharing with entrepreneurs?

Lee: Instead of sharing a reading list, my advice to entrepreneurs is to expand your horizon and challenge yourself to read something different from your usual reading list.

The best ideas come from outside your industry, the best inspirations from people you don’t usually hang out with.The best biographies are from experts in other sectors. If you are a nonfiction reader, pick up a book that is sci-fi or fantasy. If you are a tech reader, pick up a book that is about genetics or healthcare. If you are in the enterprise space, read about innovation and new monetization models in the consumer space. If you are a startup in e-commerce, learn all about online gaming and social apps.

My most recent book is a biography of an oncologist. The book allowed me to get a glimpse of the system and people at work in the field of oncology and it has given me a better appreciation of a side of life which I had little interaction within my current work.

It has also prompted some early interest in how today’s AI technology can be leveraged to aid better drug discovery in the medical field, an area that is not our current investment focus. A previous book I read was about survival tactics in the wild, in a world where we run out of electricity, internet and gas. For an internet investor and a big electric car fan, the book is a reminder of how technology has changed our lives and what we have lost and gained in that process. I believe over the next 10 years, we will start to see new startups, maybe even new funds, advocating the “anti-connectivity” movement, focusing on how to get consumers back to enjoying nature, real human interaction and switching off from the online chaos and information overload.

Lastly, before you become a great investor or a great entrepreneur, first become an interesting and thoughtful person that people want to spend time with and work with.It’s what makes us different from the bots.

Editor: Nadine Freischlad & Ben Jiang